·       The UK government will open Allocation Round 8 (AR8) this July to accelerate renewable energy deployment, extending the pipeline of opportunities.

·       The Contract for Difference (CfD) scheme offers long-term, inflation-linked revenue opportunities.

·       Foresight Solar plans to recycle capital into higher-return assets including solar-plus-storage to deliver attractive total return for shareholders.

 

The UK government's decision to bring forward Allocation Round 8 of its Contracts for Difference scheme is creating what many renewable energy investors see as one of the strongest opportunities in years to acquire and develop government-backed clean energy assets.

The Department for Energy Security and Net Zero has confirmed that AR8 will open in July 2026, continuing the government's push to accelerate renewable energy deployment and strengthen energy security. The announcement follows a record-setting AR7 auction, which awarded contracts to a significant volume of renewable energy capacity and reinforced investor confidence in the UK's primary support mechanism for low-carbon generation.

For listed infrastructure investors such as Foresight Solar, this latest auction cycle could create a sizeable pipeline of opportunities, particularly as the economics of the CfD regime have improved in recent years.

 

How the CfD regime works

The Contracts for Difference scheme is the UK's main mechanism for supporting new renewable electricity generation.

Under the system, developers compete in auctions for long-term contracts that guarantee a fixed strike price for the electricity they generate. If market power prices fall below that level, generators receive a top-up payment. If prices rise above the strike price, generators pay the difference back. The structure provides revenue certainty for developers while helping protect consumers from price volatility.

The CfD regime replaced the Renewables Obligation (RO) scheme, which supported renewable generators through tradable certificates linked to electricity production and was responsible for the installation of 35 GW of renewables, according to the UK’s energy regulator, Ofgem. While the RO framework helped establish the country’s renewable energy industry, the CfD model is designed to deliver greater competition and lower prices for consumers.

The falling cost of wind and solar have contributed to make this possible. These technologies no longer rely on subsidies, and business models focus instead on revenue stability to meet investor return requirements.

Recent reforms have further strengthened the attractiveness of the scheme. Most notably, contract durations were extended from 15 years to 20 years, improving revenue visibility and making projects easier to finance.

For investors, the appeal is straightforward: long-term, government-backed revenues linked to electricity production from reliable renewable generation technologies. For taxpayers and consumers, the competitive auction structure is intended to secure new renewable capacity at the lowest possible cost.

 

A growing opportunity

The scale of the opportunity has expanded alongside the recent reforms.

AR7 delivered record renewable energy procurement, with contracts awarded across a broad range of technologies and 4.9 GW of solar capacity securing contracts. AR8 is expected to attract another large field of eligible projects, although the final auction budget is yet to be published. Industry estimates suggest around 12 GW of solar capacity could be eligible.

 

	AR6	AR7	AR8
Solar capacity awarded CfDs	3.3 GW	4.9 GW	TBD
Number of projects awarded CfDs	93	157	TBD
Strike price	£69.88/MWh (2024 prices)	£65.23/MWh (2024 prices)	TBD
Delivery years	2026/2027 and 2027/2028	2027/2028 and 2028/2029	2028/2029 and 2029/2030
Contract length	15 years	20 years	20 years

 

For Foresight Solar, the significance extends beyond the auction itself.

“More than 7 GW of projects that secured contracts in AR6 and AR7 are understood to be progressing towards construction. This includes an estimated 200 projects in the 10 MW to 50 MW range, broadly aligned with the scale of plants we hold in our portfolio,” says Toby Virno, Foresight Solar fund manager. “That creates an attractive acquisition universe in our core UK market.”

 

Why CfD-backed assets matter

The opportunity arrives at an important moment for the UK renewable infrastructure sector.

Many solar assets commissioned under the Renewables Obligation regime will see subsidy support expire over the next decade. As a result, investors are increasingly evaluating how to refresh portfolios while maintaining stable revenues.

For Foresight Solar, long-term, inflation-linked CfD revenue streams can improve cash flow visibility. Increasing the duration of these contracted revenues provides greater confidence in the sustainability of distributions to shareholders.

 

Funding future growth

“The challenge for listed renewable energy infrastructure funds is not only finding attractive projects but funding them,” Virno explains. “To address that, our strategy is to continue executing on the phased asset divestment programme. We are also evaluating additional ways to unlock cash from the existing portfolio. This capital can then be recycled into construction-stage opportunities with attractive return profiles.”

Alongside standalone solar projects, the Company has identified solar-plus-storage opportunities that can provide exposure to higher returns, complement the portfolio and further future-proof it for a lower-carbon world. Foresight Group's established developer relationships and market knowledge allow it to source assets directly through bilateral transactions as well as participate in competitive sale processes.

 

Looking ahead

The accelerated AR8 timetable signals the government's determination to maintain momentum behind the UK's clean power ambitions. For investors, the combination of longer contract terms, inflation-linked revenues and government-backed offtake arrangements is making CfD-backed projects increasingly attractive.

For Foresight Solar, the emergence of a large pipeline of contracted renewable projects in its core market could provide an opportunity to recycle capital into assets that offer greater long-term revenue visibility while preserving inflation protection. If executed successfully, this strategy will support the Company's objective of delivering attractive total return for shareholders – the combination of a sustainable dividend and modest long-term growth.